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Financial wellness programs boost retirement outcomes

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More companies are embracing comprehensive financial wellness programs instead of basic financial education because of the bottom line benefits these plans offer.

It has been proven that financial stress has a negative impact on an employee’s health. Stressed out employees are more prone to health risks and higher health care costs, said Linda Robertson, a senior resident financial planner at Financial Finesse.

Financial Finesse has studied the effects of financial wellness programs for 13 years. In its most recent study, the company compiled data from 3,576 workshops it conducted with clients between Jan. 1, 2007, and Dec. 31, 2012.

Out of all those who participated in the workshops, 88 percent of participants who answered the survey said they took action to improve their finances.

The most common behavioral changes were reviewing the asset allocation in their retirement plan, using the calculators or worksheets provided by Financial Finesse, reducing monthly expenses or credit card debt and increasing contributions to their retirement plan.

On average, participants made three changes to improve their finances.

One of the major benefits of offering a financial wellness program is a reduction in health care costs.

“When you are looking at health care, financial stress is causing many of these chronic illnesses,” said Robertson. “We can see 50 percent higher health care costs for employees under financial stress.”

Having a corporate-sponsored financial wellness program reduces health care costs, increases productivity and performance and allows more employees to retire on time, she said. There also is an increase in satisfaction with employee benefits.

In Financial Finesse’s most recent survey, 62 percent of plan sponsors said they see a connection between financial wellness programs and productivity and performance.

When implementing a financial wellness program, it is important to have a multi-channel program and a way to track the effectiveness of each delivery method. 

According to Liz Davidson, president and CEO of Financial Finesse, companies need to survey employees 30 days after an educational event to see if they made positive financial changes. Did they take at least one step to improve their finances, like paying off their credit card in full or starting an emergency fund.

Through its research, Financial Finesse found that 401(k) deferral rates averaged nearly 6 percent with one interaction with the company’s financial wellness program. For those with five or more interactions with the program, average deferral rates increased to 11 percent.

Jason Chepenik, managing partner for Chepenik Financial, said during a webinar with Financial Finesse, that one of his clients, Intersil, began a financial wellness program, but wanted to make sure it was relevant to its employees.

The company, which makes parts for the semiconductor industry and is based in Northern California, has about 1,500 employees. It has always been progressive when it comes to employee benefits programs, offering auto enrollment in its 401(k) plan 12 years ago, with a 6 percent deferral rate.

“It took leadership and vision to do that as an early adopter,” said Chepenik.

The majority of Intersil’s employees are within 10 to 15 years of retirement, with an average income of $110,000. The average 401(k) account balance at the company is $200,000.

The company wanted to offer its employees a comprehensive place to access financial tools and advice.

Its first step was to conduct an assessment to find out where employees were experiencing financial knowledge gaps to decide where to focus their efforts with a financial wellness program.

To get employees to agree to take part in the assessment, the company announced it would give away an iPad to one of the people who signed up to take part. The goal was to get 25 percent of employees to take part in the program. Instead it achieved 45 percent.

Intersil’s Wealthy Living program gives employees access to a financial planning tool and a financial advisor who will act as a fiduciary.

To make a program like this work, companies have to address why it is important for employees to take charge of their finances. “You have to engage them, get them to understand that by making small changes they can make a big difference over time,” said Davidson.

She added that if a program doesn’t answer the question, “What is in it for me?” it doesn’t matter how great the education is, it is not going to resonate.”

Once an employee assessment has been completed, the company can design a financial wellness program that best fits the age, lifestyles and demographics of their employees. It can be targeted to their wants and needs.

See also:

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